Driving long-term & concessional finance in Africa’s renewable energy space

Trade between Rwanda and Zimbabwe continues to flourish, with Rwanda's imports from Zimbabwe surging by 52 per cent and exports increasing by 8 per cent as of April this year. Both nations are committed to maintaining this upward trajectory under the African Continental Free Trade Area (AfCFTA). CNBC Africa's Aby Agina spoke to the Zimbabwean Ambassador to Rwanda, Charity Manyeruke, for more insights. However, another critical aspect of economic development in Africa lies in the green energy space. According to UNCTAD, the estimated value of international project finance deals with African nations in the green energy sector decreased by 50 per cent to $64 billion in 2023, following a 20 per cent drop in 2022. To delve deeper into this trend, CNBC Africa engaged in a discussion with Kombate, the head of Renewable Energy and Climate Adaptation at AECF. Kombate shared insights on the investments in green energy in Africa and the unique approach taken by AECF in promoting sustainable energy projects across the continent. AECF's REACT portfolio has experienced remarkable growth, surpassing 80 million US dollars, despite the decline in overall green energy investments on the continent. By 2024, the portfolio is expected to reach approximately 150 million USD, with a significant portion allocated to electrification projects in East Africa, particularly in countries like Kenya and Mozambique. The funds have been instrumental in supporting businesses focused on electrification and clean cooking technologies, with electrification initiatives attracting the majority of capital. The impact assessment reveals that over 50% of households reached benefited from clean cooking technologies, highlighting the tangible outcomes of AECF's investments. When evaluating the scalability and sustainability of energy projects, Kombate emphasized the pivotal role of electrification technologies in achieving universal energy access by 2030. Technological innovations such as mini-grids and solar home systems present significant potential for expansion and can enhance the financial viability of energy initiatives. This symbiotic relationship between different energy solutions underscores the importance of leveraging diverse approaches to enhance energy access across the continent. Furthermore, the concessional nature of AECF's financing model has been a driving force behind the success of its green energy projects. By aligning funding with the strategic vision of donors, AECF provides grants and zero-interest loans to investees, encouraging private sector participation and shared risk. The emphasis on scalability, additionality, and co-financing from private sector players further solidifies the concessional and catalytic nature of AECF's financial support. In addressing gaps in the financing landscape, Kombate highlighted the need for efficient instruments like Results-Based Financing (RBF) to support growth-stage companies. However, challenges persist for early-stage companies that struggle to secure funds to unlock RBF opportunities. Commercial banks and investors may also exhibit hesitance in supporting emerging asset classes in the green energy sector, leaving a notable gap in financing options for budding energy projects. In conclusion, the conversation with Kombate shed light on the critical role of innovative financing models in driving sustainable energy investments in Africa. As the continent navigates the transition towards clean energy solutions, initiatives like AECF's REACT portfolio play a key role in accelerating progress towards universal energy access and environmental sustainability.